4-hour timeframe
Technical details:
Higher linear regression channel: direction - upward.
Lower linear regression channel: direction - downward.
Moving average (20; smoothed) - downward.
CCI: -36.9616
The EUR/USD currency pair continued to trade very calmly on Monday, June 28. In principle, nothing is surprising since there was absolutely nothing for the markets to react to on Monday. Moreover, such a weakly volatile movement of the pair has been observed for quite a long time. It is seen from the illustration below, which presents data on volatility for the last 30 trading days. Thus, at this time, the markets have already completely calmed down after summing up the results of the Fed meeting, when the US dollar rose by 250 points, and now the pair needs to decide on the further direction of movement. We have already said several times that at this time, only the technical factor speaks in favor of further growth of the US currency. Namely, the correction factor against the global upward trend, which is visible on the 24-hour timeframe. As part of this correction, the pair's quotes may resume a downward movement to the level of 1.1700 or slightly lower. Also, the pair bounced off the moving average line speaks in favor of continuing the decline in the pair's quotes, so the downward trend continues. But the fundamental factors still speak in favor of a new fall in the US currency. The central banks of the EU and the US did not give any reason to traders to expect the curtailment of stimulus programs in the coming months, which means that the ECB and the Fed will continue to print money and pour it into the economy. However, there is much more money being printed in the States, and inflation is much higher. Therefore, these factors speak in favor of the resumption of the fall of the US currency. Based on all the above, we can assume that the pair will first fall to the level of 1.1700 and then resume the upward trend. In any case, we have a benchmark for determining the trend – the moving average line. As long as the price is below the moving average, it would be best if you did not buy euro/dollar.
At the weekend, we already talked about what to expect this week for traders. There will be quite a lot of interesting information. However, there are only two really important reports. From our perspective, only the ADP and Nonfarm Payrolls reports can be called important reports in the current circumstances. Both of them reflect the state of the labor market, and it is the recovery of the labor market that the Fed is most concerned about now. Therefore, we should also pay special attention to these data. Recall that Jerome Powell also made it clear that monetary policy tightening should not be expected before completing the labor market recovery. What can we expect from the ADP and Nonfarm Payrolls reports this week? The ADP report has been steadily growing over the past six months. If in December 2020 the value of -75 thousand was recorded, then in May 2021 – already +978 thousand new employees in the private sector.
Unfortunately, traders' expectations and forecasts do not always coincide with the actual values. Several times, the markets' expectations were so great that even high values of the indicator could not reach them. And, as a rule, if the forecast is higher than the actual value, this causes pressure on the currency. Thus, despite the 6-month growth of the ADP indicator, it did not always provoke the strengthening of the US dollar, and it was ignored altogether. With the Nonfarm report, of course, the situation is completely different. A couple of times in recent months, traders have managed to ignore it, but there was still a reaction in most cases. However, the nature of the latest values of this report and its dynamics are worse than that of ADP. The last two reports were weaker than the forecast values, which caused a wave of disappointment among traders. The values of the last months are quite high, but there were a couple of failures. In general, it doesn't even make sense to guess what these reports might turn out to be. You will have to wait for their publication and react according to the actual value.
In addition to macroeconomic statistics on the US labor market, Christine Lagarde will give a speech almost every day this week. Recall that in the last two weeks, almost all the attention of the markets was focused on the actions and statements of the central banks of the United States, the European Union, and the United Kingdom. It cannot be said that the representatives of these banks somehow surprised the markets or signaled that changes in monetary policy should be expected in the near future. However, there are still many questions concerning inflation, the pace of economic recovery, and the timing of the completion of the stimulus. Thus, potentially every speech by Christine Lagarde (or Jerome Powell) is interesting. The problem is that Powell or Lagarde cannot surprise the markets with new information every day.
Moreover, it is better to say that this happens quite rarely. Thus, Lagarde's probability of reporting something interesting on Tuesday, Thursday, or Friday is low. All these reflections bring us closer to the conclusion that this week's volatility of the euro/dollar pair will remain very low until Friday. In principle, Monday has already shown that traders are not ready to start from scratch and will wait for important information, which will appear only on Wednesday and Friday. Thus, on the 4-hour timeframe, the US currency now has a slight advantage, but to maintain it, the statistics from overseas this week mustn't disappoint traders. As long as the price is located below the moving average line, it is naturally recommended to trade down.
The volatility of the euro/dollar currency pair as of June 29 is 50 points and is characterized as "average." Thus, we expect the pair to move today between the levels of 1.1872 and 1.1972. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward correction.
Nearest support levels:
S1 – 1.1902
S2 – 1.1841
S3 – 1.1780
Nearest resistance levels:
R1 – 1.1963
R2 – 1.2024
R3 – 1.2085
Trading recommendations:
The EUR/USD pair is trying to resume its downward movement. Thus, today it is recommended to stay in short positions with targets of 1.1872 and 1.1841 until the Heiken Ashi indicator turns up. It is recommended to open buy orders now no earlier than the price is fixed above the moving average line with a target of 1.2024.
